The last time OPEC got together to impose a significant production cut, it sent the US economy reeling. Will their deal today to cut back daily production at least 10% be enough to salvage the US energy sector? And just how much did OPEC+ agree to reduce — 10 million barrels per day, or 20 million, as Trump claimed?

Both figures are being reported today, depending on the news outlets and the timing of the reports. Either way, it’s historic, CBS notes. Their analyst credits Trump for directly intervening in the Saudi-Russia production war that nearly obliterated oil prices:

OPEC, Russia and other oil-producing nations on Sunday finalized an unprecedented production cut of nearly 10 million barrels, or a tenth of global supply, officials said. The agreement is aimed at boosting crashing oil prices amid the coronavirus pandemic and a price war, yet oil prices were little changed on Monday.

“This could be the largest reduction in production from OPEC for perhaps a decade, maybe longer,” said U.S. Energy Secretary Dan Brouillette, who credited President Donald Trump’s personal involvement in getting dueling parties to the table and helping to end a price war between Saudi Arabia and Russia.

“This is a critically-needed relief in the face of declines in crude demand,” said Roger Diwan, vice president financial services at oil researcher and data provider IHS Markit. “The direct involvement of President Trump to forge this historical deal is the most unusual aspect of it and reflects his visible concern for U.S. shale producers.”

CNBC analyst Dan Yergin noted the “pivot” by Trump to initially let the two countries fight it out. At first, Trump noted that lower oil prices meant low gas prices and lower transportation costs for American consumers. However, US energy producers need oil to be above a certain level to make their more expensive extraction methods — fracking in particular — profitable. Crashing through the $20/barrel floor risked a collapse in US energy production at a very bad time, and Trump changed positions quickly to prevent that collapse:

“(Trump) came to see this as a national security issue, also an employment issue, and a very important factor in the U.S. economy … and he just jumped in.”

“This must be the biggest and most complex deal (Trump)’s ever made,” Yergin said. “Not only was he a deal maker, but he was also something of a divorce mediator.”

Yergin said there were two main factors driving the turnaround to the deal that just six weeks ago “would not have seemed possible.”

Firstly, he said, the price of oil was in danger of crashing without a deal as there was limited inventory space left. That would have had “severe repercussions” beyond the oil industry itself and other sectors such as finance.

The other driving factor was likely due to a dearth in oil demand, where the “producers found they couldn’t sell their oil.” Crude demand has taken a hit in recent weeks as measures taken by authorities to stem the spread of the coronavirus pandemic have left major economies effectively frozen.

“I think all those things came together but then it was this dealmaker … Donald Trump who got on the phones,” Yergin said. “I would say it looked like a mission impossible a few weeks ago. Turned out, it was mission possible.”

The amount of cut does matter, though, because of the depth of the demand crater — for now. In an earlier report before the announcement, the Wall Street Journal pegged the cut at 9.7 million barrels. Later, the WSJ reported that both Trump and Saudi Arabia estimate the reduction at 20 million barrels per day, roughly 20% of normal supply, based in part on other cuts in production:

President Trump said a coalition of 23 nations that reached a deal on Sunday to address a mounting global oil glut is aiming to cut production by 20 million barrels of oil a day, more than twice the number originally revealed. …

Saudi Arabia pushed to tout the 20-million-barrels-a-day amount in a press release announcing the final agreement but faced resistance from other countries that argued it was inflated. The figure takes into account the 9.7-million-barrels-a-day production cut and 3.7 million barrels a day from Group of 20 countries that are mostly market-driven declines.

It also includes existing sanctions on Iran and Venezuela and outages in hot spots such as Libya, according to a draft press release.

The net effect of all these actions, therefore, will be a net 20% reduction in production. Will that be enough to support oil prices? Crude prices rose by 0.8% on the announcement, coming up to $23/barrel by 1:30 ET. By 4:30 ET, however, it had fallen to $22.45, 29 cents off its opening price. Investors don’t seem convinced it’s enough, but at least the bottom stopped falling out. All the markets but NASDAQ finished in the red, so that might be part of a general retrenching, too.

For Trump, this is nothing but upside. If the deal holds — OPEC is notorious for cheating on each other — and it keeps US energy producers alive, Trump’s a hero. If it falls apart, Trump can easily (and correctly) blame OPEC for its disastrous infighting in a moment of global crisis. Let’s hope, however, that it doesn’t come to that.